Bitcoin’s price fell to below $50,000 (£36,000) per bitcoin, hitting its lowest level since early March. Wall Street stocks, shares in technology companies and digital assets such as bitcoin all retreated following reports of new legislation emerging from the White House on Thursday night. The S&P 500 market closed with a loss of 0.9 percent, while the FTSE 100 and European markets all traded lower on Friday morning. Bitcoin had surged to a record high on April 14 as the cryptocurrency’s value reached $64,895 (£44,754) on the same day Coinbase, the US’s largest crypto exchange platform, launched on Wall Street’s tech-loaded Nasdaq stock exchange.
Why is Bitcoin crashing?
Bitcoin has been crashing after US President Joe Biden was revealed to be planing to raise taxes on the US’s wealthiest citizens.
The law comes in an effort to tackle inequality and finance higher social spending.
The White House has been putting the finishing touches on the capital gains tax for rich individuals, forcing bitcoin to plummet as uncertainty took hold.
If it goes through, the capital gains tax would double the tax rate rich people pay on investment returns when they sell stocks and other assets – including bitcoin.
READ MORE: Why is Bitcoin crashing? Joe Biden tax triggers ‘consequences’
Under President Biden’s proposal, the federal capital-gains tax rate would be as high as 43.4 percent, according to a Bloomberg report.
Investors currently pay a 23.8 percent rate on long-term capital gains.
As a result of the tax proposal prompting fears for future investment in digital assets, bitcoin was sent down by as much as 10 percent this week.
However, equity market investors appear more sceptical about the chances of the tax changes coming through congress with Mr Biden.
London investors took Wall Street’s plummet in their stride as the FTSE 100 index fell by just 10.20 points to 6,929,40.
Bitcoin’s recent rise comes as emergency stimulus from the US Federal Reserve and Government support schemes during the pandemic helped to inflate financial markets.
Analysts have said the higher rates could lead to rich individuals selling shares to lock in current rates.
Private equity investors and hedge funds would also undoubtedly be affected.
Other major cryptocurrencies have also suffered severe losses indecent days, with more than half a trillion dollars wiped straight from the market according to CoinMarketCap.
The scale of bitcoin’s latest crash, which is the largest in financial value but not in percentage, has led to comparisons to the crypto market crash of 2017 and 2018.
However, Paolo Ardoino, chief technology officer at cryptocurrency exchange Bitfinex, said: “Any comparison with the crypto winter of 2018 belies the amazing growth of the digital token ecosystem.
“The quantum technological leap that has taken place – both in terms of market structure and the advances in different protocols – may make today qualitatively different. Time will tell.”